Dec 23, 2011

Binder and Binder Advertising Expenses -- Off The Charts!

The Wall Street Journal article yesterday contained some interesting information on Binder and Binder's operations. Their total revenues in 2010 were about $88 million, which is a stunning number, but almost as stunning to me was Binder and Binder's television advertising expenses, more than $20 million. As big as that number is, you must remember that television is only a part of their advertising expenditures. They also engage extensively in search engine marketing, which is also expensive. Their search engine marketing expenses are probably in the same ballpark as their television advertising expenses. This means that they are probably paying out something over 40% of their gross revenues on advertising. Spending that kind of money on advertising explains their service delivery problems. They have little money to spend on customer service after paying for all the ads.

How does Binder and Binder's advertising costs as a percent of their revenue compare to the average Social Security practice? I can only make a rough guess here but I think it safe to say that Binder and Binder is incredibly far off the chart.

Don't you have to wonder about any enterprise that spends such a huge percent of its revenues on advertising? Who else does this? Luxury retailers, maybe?

By the way, I'll also take a guess that Binder and Binder's profit margin is small. How can they have much profit, spending that much on ads? I wonder how well they''re doing in the current downturn in fee payments.

6 comments:

Anonymous
said...

Social Security Disability Insurance (SSDI) is big business. I wonder how many people make a living off the SSDI program and the yearly income of those people is probably way more than what beneficiaries receive for the year.

I think you are way off in your claim that their Search Engine Ad costs will be the same as their TV Ads. I bet all of their other Ads (Billboards, web banners (which you may have seen on the Wall Street Journal website), Search engines, etc.) don't add up to even half of what they spend on TV ads. For the record, I'm an accountant, not an attorney.

Still, it seems reasonable on a per-client basis. If they spend 20 million per year getting 100,000 clients, the cost per client is a mere 200 bucks per client. And how much are they making per client? A lot more than 200 bucks, I imagine. That's a train they are going to ride all the way to the station.

$20 million is probably the "list price" of their TV ads. They probably get substantial discounts off that rate. There is an entire industry out there specializes in producing TV ads for lawyers and managing the media buying for the ads. They get even better rates.

The television advertisements seem to be a curious investment. Seems as though you would drive your administrative costs way up screening through endless amounts of people who obviously aren't eligible, but THINK they're eligible for benefits. Doesn't seem very lucrative to me....

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